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Getech plunges on profit warning

The lumpy nature of Getech's revenue stream has tripped up the company again

Getech Group -

January is often the month when companies report a failure to close contract negotiations and so it has proved for Getech Group PLC (LON:GTC).

The geosciences firm said negotiations on several substantial transactions overran from December 2019. As a result, 2019 revenue is expected to be around £2mln lower than previously expected at £6mln or so, compared to revenue in 2018 of £8.0mln.

The lower revenue will have a knock-on effect on profits but lower total costs will limit the year-on-year impact on profitability.

Getech said it expects underlying earnings (EBITDA) will fall somewhere in the range of £600,000 and £800,000, down from £1.1mln the year before.

The group said it expects to take a chunky non-cash hit to reported profits as a result of a write-down in the value of the goodwill associated with the acquisition of ERCL in April 2015; the total carrying value of this goodwill is currently £3.1 million.

On the plus side, during the second half of 2019 cash balances rose by £600,000 to end the year at around £3.6mln, up from £1.4mln a year earlier.

The firm also highlighted that during 2019 forward sales increased by 41% year-on-year while its order book grew by 48%.

"Getech began December 2019 financially ahead year-on-year and with a high-value sales pipeline that was commercially well-advanced. The shortfall in 2019 revenue is therefore disappointing,” admitted Jonathan Copus, the chief executive officer of Getech.

“Alongside the growth delivered in 2018, this highlights how Getech's earnings remain exposed to lumpy transactions, the exact timings of which can be difficult to influence. We are however strategically driving significant growth in our order book to progressively lessen this exposure. We also work to protect Getech and its profitability from year-end risk through careful capital management.

“We have begun 2020 with a full and diverse sales pipeline, this benefiting from 2019 sales campaigns in new regions, with new potential customers. Our focus is to realise the value of this pipeline and in January 2020 we have already added a new super-major Globe customer,” he added.

Shares in Getech plunged 22% to 20p in early deals.

Quick facts: Getech Group

Price: 17.25 GBX

AIM:GTC
Market: AIM
Market Cap: £6.48 m
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